Welcome Back, Carter

I mentioned in my last post that environmentalist policies have been a major driver of the energy crisis that's currently eating up Europe. We are now beginning to see the same dynamic play out in North America.

West Texas Intermediate crude, America's oil benchmark, is trading at just under $80 per barrel, double what it was a year ago. Average gasoline prices in the U.S. are at their highest point in seven years. After years of having to compete with lean, mean North American resource companies, OPEC is back in the driver's seat and enjoying profits that come at the expense of American and Canadian producers who have been cursed (by their own customers, no less) with environmentalist governments. Justin Trudeau actually got reelected on the promise to continue to increase taxes on heat and energy in a cold country just before the winter. (Not that his opponent even attempted to hold him accountable). Joe Biden was cagier about his actual plans while campaigning, but the pledges were there for those that had ears to hear.

The nations of OPEC, whatever their other problems, have a better instinct for self-preservation than that.

But even with their green bona fides, Biden and Trudeau can't catch a break from Team Gaia. Despite a looming energy crisis, the eco-warriors are refusing to back down in their battle against Enbridge Line 5. The pipeline, which brings petroleum products from Alberta to Ontario by way of Michigan, has been the subject of protests and a simmering legal dispute with Michigan's Governor, Gretchen Whitmer. Here's what I wrote about the stakes in this fight back in May:

Some 540,000 barrels of Canadian oil and natural gas pass through Line 5 every day, between 40 and 50 percent of Ontario and Quebec's total supply.... It has been referred to as the “spinal cord of Ontario’s infrastructure,” and through Ontario, to Quebec and points further east as well. A shutdown would have devastating consequences for consumers in eastern Canada, leading to fuel shortages and price spikes. And then there's the effect on employment -- the government of Ontario estimates that killing Line 5 would cost that province 5,000 jobs directly and indirectly almost 25,000. Whitmer's own constituents would be effected as well -- half of the propane used to heat homes in Michigan passes through Line 5, and a great deal of oil bound for Ohio and Pennsylvania besides. But that's nothing like the effect a shutdown would have on Canada's two largest provinces.

All of that is still true, but this is running a lot hotter than was expected back then because we're seeing "fuel shortages and price spikes" as well as depressed employment numbers while Line 5 is still up and running!

Consequently, the Trudeau government have now invoked the Transit Pipeline Treaty of 1977 in court with the hope of sidestepping the local authorities in Michigan so they can begin negotiating directly with the Biden Administration about the future of Line 5. But who knows if that will improve the situation? After all, the same activists who have Gov. Whitmer's ear also have powerful friends in the White House, and then president hasn't exactly shied away from screwing over our neighbors to the north.

It's become almost a cliché to say the 1970s are back, what with rising crime, stagflation, and especially an energy crisis, while a feckless liberal president blames everyone but himself. But as John Robson has pointed out, what we're going through now is worse in one important respect:

[A]t least in the 1970s it was done by accident, through policies that achieved the opposite of what their architects hoped and expected. This one is deliberate. They said they would get rid of fossil fuels, mocked those who protested that it would cause economic disaster, and now that it is they’re doubling down. They really mean it.

We're getting a glimpse of the future they've been planning. If we don't change course, it's going to get a lot worse.

Gretchen Whitmer in the Enbridge Pipeline Wonderland

The drama surrounding Enbridge Inc.'s Line 5 is getting tense. Michigan's governor, Gretchen Whitmer, has ordered the Calgary-based energy company to cease operating the pipeline by May 12th. Enbridge has vowed to defy that order, which it insists Whitmer has no authority to issue, and await a legal judgement. Whitmer's office has declared that "Enbridge’s continued operation of the Line 5 pipelines in the Straits of Mackinac [after May 12th] would be unlawful." Enbridge executive vice-president Vern Yu shot back, “We will not stop operating the pipeline unless we are ordered by a court or our regulator, which we view as highly unlikely."

Tempers are clearly running hot, and they have been for months. Back in November, Whitmer fulfilled a campaign promise by revoking the easement -- first granted in 1953 -- which has allowed Enbridge to operate a pipeline along the bottom of the Straits of Mackinac en route to refineries in Sarnia, Ont., arguing that any rupture in the line could devastate the ecosystems of two Great Lakes -- Lakes Michigan and Huron.

Line 5 has never had a significant leak in its nearly seventy-year history, but even so Enbridge had already proposed a solution to this potential problem -- a replacement pipeline to be laid beneath the riverbed and encased in concrete, with the object of safeguarding the straits. This was too little, too late for Whitmer and her fellow environmentalists, who pointed out that the proposed project would take years to complete.

Take that, Canada!

Some of that time, of course, is due to agencies in Whitmer's own administration dragging its feet about issuing permits and cheerfully adding extra regulatory hurdles. Most recently, the Michigan Public Service Commission, all of whose members are Whitmer appointees, decided that it was legitimate for them to take into account the environmental impact of the petroleum products the pipeline is transporting when deciding on the environmental impact of a new pipeline.

I'll say that again -- the commission is going to factor the future CO2 emissions of the oil and gas which pass through Line 5 into their decision about whether the pipeline itself poses a threat to the Great Lakes. Utterly insane, bringing to mind a certain tea party from the pen of Lewis Carroll:

Mad Hatter: Would you like a little more tea?
Alice: Well, I haven't had any yet, so I can't very well take more.
March Hare: Ah, you mean you can't very well take less.
Mad Hatter: Yes. You can always take more than nothing.”

Quite a lot is at stake in this dispute. Some 540,000 barrels of Canadian oil and natural gas pass through Line 5 every day, between 40 and 50 percent of Ontario and Quebec's total supply, including all of the jet fuel used at Toronto’s Pearson International Airport. It has been referred to as the “spinal cord of Ontario’s infrastructure,” and through Ontario, to Quebec and points further east as well. A shutdown would have devastating consequences for consumers in eastern Canada, leading to fuel shortages and price spikes. And then there's the effect on employment -- the government of Ontario estimates that killing Line 5 would cost that province 5,000 jobs directly and indirectly almost 25,000.

Whitmer's own constituents would be effected as well -- half of the propane used to heat homes in Michigan passes through Line 5, and a great deal of oil bound for Ohio and Pennsylvania besides. But that's nothing like the effect a shutdown would have on Canada's two largest provinces.

And that makes this a tricky situation for Canada's famed green prime minister, Justin Trudeau. As Rex Murphy has pointed out, for the Canadian left, environmentalism was always supposed to be an anti-Alberta project. Though cloaked in high-flung rhetoric about saving the planet, in Canada the Green Movement has often been a cat's paw of the left-of-center parties for preventing the conservatively inclined western provinces from capitalizing on their natural resources and enhancing their economic might. But, notes Murphy:

Line 5, is not a pipeline OUT of export-blockaded Alberta, heading to the U.S. and hoping for a better market. Line 5 is a pipeline INTO Ontario, and — as Robert Frost was good enough to supply the phrase — that “has made all the difference.”

The 2019 election definitively demonstrated that the Trudeau Liberals can remain in power with essentially zero support out west, but only if they pull big numbers in Ontario, Quebec, and the Maritimes. If, however, voters in those provinces, whose fuel bills have already swelled thanks to Trudeau's carbon taxes, suddenly see their gas prices jump by, say, 30 percent, coupled with related job losses in the tens of thousands, enough of them are going to flip to one of the other parties to boot Justin from power, no matter how hard the CPC appear to be trying to lose.

2019 election by province (Wikicommons)

Consequently, the Trudeau government is desperate for the Line 5 dispute to be resolved in their favor. According to Reuters:

Ottawa’s strategy... is to repeatedly raise the issue of Enbridge Inc.’s Line 5 with numerous U.S. counterparts — including Biden — to get them to pressure Michigan’s Democratic Governor Gretchen Whitmer to keep the pipeline open.

Trudeau has apparently spoken to Biden directly about Line 5 more than once, but with no public response from the president as of yet. And Whitmer's side seem disinclined to back down -- Whitmer ally Liz Kirkwood recently remarked that “[t]he Canadians are awfully silent about our shared responsibility to protect the Great Lakes." Consequently, the Canadian government has begun flirting with more drastic measures, including invoking the (never-before-used) 1977 Transit Pipelines Treaty, which states:

No public authority in the territory of either party shall institute any measures… which are intended to, or which would have the effect of, impeding, diverting, redirecting or interfering with in any way the transmission of hydrocarbon in transit.

Suffice it to say, this is far more than they ever did for Keystone XL. And, of course, that makes this a mess of their own making, at least in part. As I wrote at the time, there was "no obvious limiting principle" to the rationale for killing Keystone, and now the same vacuous arguments are being deployed against Line 5. Had Trudeau been willing to actually defend Canadian interests then, it's unlikely that he would have this problem now. Instead, he played politics while accepting a pat on the head from the global environmentalist crowd.

Well now he's on the receiving end while Gretchen Whitmer does the same thing. Trudeau deserves everything he gets. And it's tempting to say the same for the people of Ontario and Quebec. After all, they voted for him.

In Michigan, the Left's New Attack on Pipelines

In a surprise maneuver on November 13, Michigan governor Gretchen Whitmer, a Democrat, took legal action against Canadian pipeline operator, Enbridge, revoking a 67-year old-easement to extend an approximately four mile underwater section of the pipeline that runs through the Straits of Mackinac. The revocation takes effect in May 2021, at which time Enbridge would be expected to cease operating the line. Line 5 is part of Enbridge's Lakehead network of pipelines.

The effect of closing Line 5 will be to shut the entire pipeline, which runs between Superior, Wisconsin and Sarnia, Ontario and carries about 23 million gallons of oil and natural gas liquids system-wide, daily. Line 5 moves about 540,000 barrels daily.

Curiously, Whitmer appears to be about two years late to the party. In 2018 Enbridge reached an agreement with then-Governor Rick Snyder to replace the underwater segment with a new pipe. It will be housed in a tunnel that is to be drilled through bedrock beneath the Straits of Mackinac. The company is seeking state and federal permits for the project, a process that is notoriously arduous and slow, but is ongoing. In this case these regulatory requirements are slowing the process that will mitigate the concern the state alleges in their order. Did you follow that?

What a good idea.

In short, Governor Whitmer is playing games -- asserting solutions to problems that do not exist and using taxpayer money to do it. She is two years too late and five paces out of step. Enbridge cannot begin drilling the replacement tunnel until the requisite permits and regulatory review is complete, a process that is currently underway on a timeline over which Enbridge has no specific control.

Through an understanding of supply and demand curves and the cost of inputs, the economic implications of shutting this pipeline are predictable. The price of propane and other products transported through this network will increase. This is plainly detrimental for the citizens of Michigan and the broader market. Pipelines are after all the safest and fastest way to move oil and gas from the field to refineries. Whitmer wants inexpensive fossil fuel for her state on one hand, while nixing the very transportation system that affords Michigan’s residents this inexpensive fuel supply.

While impeding construction of pipelines is not unto itself an unfamiliar tactic for the ‘green new deal’ lobby, there is something new at work here. This shot across the Enbridge bow should not be disregarded by other pipeline operators, nor the broader oil and gas industry because it portends challenges to the oil and gas industry without a decisive response.

Pipeline operations typically fall under federal jurisdiction. Governor Whitmer, however, is acting under the state’s public trust doctrine, which in this case requires state authorities to ‘protect' the Great Lakes. The implication is that pipelines are intrinsically unsafe. But this is not true. This obviously sets the stage for Enbridge’s legal challenge.

The pipeline has been in operation since the early 1950s. Until now, older pipelines had not been thought to be targets of the efforts of green zealots. While it is not clear that Whitmer’s legal strategy could easily be applied to other pipelines, it is clear that the hunt is on. Under a potential Biden administration there is no doubt that federal agencies will be willing participants in this legal strategy.

And it always looks much like this.

This tactic was used in Washington state to try to have hydro-electric dams along the Snake River removed. In that case green zealots attempted to use the plight of Salmon, Steelhead and Orca whales as the pretense to dismantle the dams that provide clean, inexpensive electricity to those in the west. That effort was only recently rebuffed after years in court. The green zealots in that case hailed from the Center for Biological Diversity.

Now, four months after that decision based on a review by the U.S. Army Corps of Engineers, a senior attorney with the same Center for Biological Diversity, Jared Margolis, explains the strategy around Line 5 and similar pipelines to the New York Times:

I think, at some point, we do need to turn to pipelines that are in the ground that are dangerous, that are posing a serious risk.

And so the games begin. Enbridge and other pipeline owners need to develop their own narrative in the face of this new strategic assault on their industry sector. While this battle may be in Michigan, the larger war is being waged against the entire fossil fuel industry. The industry is an essential element of American energy independence and essential for market access for Canadian product.